Tesla launches US$1.8bn bond

Not major for a mainstream automaker – but clearly incredible for a company that only sells electric cars.

But the newly minted noteholders might find Musk’s mothership isn’t much help to them if Tesla lands on hard times. Another interesting fact is the model may not be called Y – thus killing off the S3XY nomenclature joke.

While we’re genuinely sad that the pair – or anyone – has to explain themselves publicly when it comes to extremely personal parts of their lives, we also completely respect their desire to quell baseless rumors and unnecessary drama.

The billionaire coined that moniker for Tesla’s Gigafactory 1 as he waxed poetic about his company’s future on an August 7 call with would-be bond buyers.

The tactics worked, as noteholders are proving willing to overlook the company’s negative cash flow and its repeated trips to capital markets to bolster its balance sheet. As the company seeks funding through a $1.5 billion bond offering, investors are at odds over whether the risk associated with the investment.

There will be a Tesla Model 3 “P” Performance version, says CEO Elon Musk, but “production hell” comes first for the mass-priced electric auto.

Tesla’s cash burn has prompted short-sellers like Greenlight Capital’s David Einhorn to bet against the Palo Alto, California company.

Last week’s trip onto the earnings stage was no different for Tesla’s CEO.

Our model suggests that a 5% cost of debt on a $1.5 billion debt raise would increase Tesla’s loss in 2018 from $1.06 billion to $1.14 billion.

Musk told analysts in May that the Model 3 will require just 5,000 feet of wiring. On the other hand, vehicle owners expecting shipment of their Model 3, S and X soon will already have the new supercomputing hardware suite and thus, no update will be required.

Moody’s Investors Service projects that Tesla will produce 300,000 of the vehicles next year.

Tesla has revealed little about the Model Y. The company says it will arrive in 2019 or 2020, although the date is apparently not firm. If successful in ramping the Model 3, Tesla’s sales will rise from $7 billion in 2016 to $22 billion in 2018, at which point a middle-income family will be able to afford an electric (and eventually autonomous) vehicle.

Safety regulations may force Tesla to adopt physical mirrors rather than cameras for the production Model Y, which is pencilled in for 2019 – although it could come as late as 2020.